December 30, 2009
Dec. 23 (Bloomberg) -- China’s plan to give domestic companies that make innovative products an advantage in the race for government contracts amounts to raising trade barriers, the Obama administration said.
China unveiled rules last month that would let companies with products accredited for “indigenous innovation” to qualify for preferences in government purchases.
“The United States has since expressed serious concerns to China about this measure,” the U.S. Office of Trade Representative said in a report yesterday.
The government contracting preferences are among a group of policies, including tax rebates, export restraints, unique standards and so-called Buy China regulations that limit trade and foreign investment, the office said in its annual report to Congress. The report is intended to assess China’s adherence to the pledges it made when it joined the World Trade Organization in 2001.
The use of trade restraints and preferences has been increasing during the past two years, the report said.
“Problems can be traced to China’s pursuit of industrial policies that rely on excessive, trade-distorting government intervention intended to promote or protect China’s domestic industries,” according to the 121-page report.
Trade Surplus
China had a record $266 billion trade surplus with the U.S. last year, according to government data. China is also the third-largest market for U.S. exports, buying $70 billion worth of U.S.-made products in 2008 compared to $19 billion in 2001, the trade office said.
The report is an annual recap of barriers China erects to U.S. products, and its efforts to comply with the commitments it made when negotiating entry to the WTO. China’s Ministry of Commerce didn’t immediately respond to a fax seeking comment.
The complaints about growing efforts by the government in Beijing to tilt commercial decisions in favor of Chinese producers have been voiced by U.S. companies and their representatives, such as the U.S.-China Business Council.
Groups representing companies such as Microsoft Corp., Symantec Corp. and Caterpillar Inc. complained about the innovation rules in a letter to Chinese ministers on Dec. 10.
“Implementation of this program will undermine the more positive relationship that our countries have been working so hard to achieve with China,” a group of 34 business groups from the U.S., Europe, Japan and India wrote then.
The report also lists concern about China’s protection of copyrighted movies, music and software and safety rules guiding the import of agricultural goods.
“China remains among the least transparent and predictable of the world’s major markets for agricultural products, largely because of selective intervention in the market by China’s regulatory authorities,” the report said.
To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net
Last Updated: December 23, 2009 05:26 EST
By Mark Drajem
SOURCE: BLOOMBERG
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